Robust Signals for Banking Crises

Ons Jedidi () and Jean-Sébastien Pentecôte ()
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Ons Jedidi: CREM-CNRS

Economics Bulletin, 2015, vol. 35, issue 3, 1617-1629

Abstract: We develop an Early Warning System framework for predicting banking crises in 48 countries from 1977 to 2010. We deal with the problem of model uncertainty and omitted variables bias using Bayesian Model Averaging. Consistent with previous findings, GDP and credit growths, financial liberalization and external total debt are decisive in predicting the occurrence of banking crises. By maximizing the relative usefulness, we find an optimal level of type I and II errors. The robustness analysis shows that our results remain broadly stable when using different income groups of countries.

Keywords: Bayesian Model Averaging; Banking Crises; Early Warning Indicators; Forecasting. (search for similar items in EconPapers)
JEL-codes: E0 F4 (search for similar items in EconPapers)
Date: 2015-07-24
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Robust Signals for Banking Crises (2015)
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